Canada the Laggard

According to a report released this week, Canada is being recommended as a “buy” by esteemed U.S. investment bank Goldman Sachs. The report included the faint praise that Canada had “deteriorated less” than most other G10 economies in this global meltdown, thanks to “relatively strong consumer spending.” Also: our banks don’t suck as badly as they do down south, according to Sachs, and our government still has some cash in the till.

So nothing to worry about, in other words – except for the fact that Canada is a laggard nation. We’re not a banking centre, like Japan or Germany or Britain or the U.S., so we tend to follow where they lead; if they’re hurting now, we’ll feel the pain soon enough. Just this month we’ve seen how a recent cut in the Bank of Canada’s prime rate was not passed on to consumers – not because of any homegrown mortgage meltdown, but because of precarious U.S. subsidiaries and foreign financial positions held by Canada’s Big Five banks. As for our much-vaunted government surplus, expect the till to empty in January with the feds’ multibillion-dollar stimulus package.

For Goldman Sachs, it hasn’t exactly been a great year for placing bets. The company announced its first quarterly loss since it went public in 1999, losing $2.29 billion during its fiscal fourth quarter and narrowly averting bankruptcy in October. There may be reasons to believe Canada will survive a recession better than other nations – just don’t expect to find those reasons in rose-coloured reports from a bank that’s bleeding red.